Decoupling: Has the Time Come?

Decoupling may have finally arrived, a little too late for the believers of two years ago. The "this time its different" crowd argued that the emerging markets could stand alone without the US and Europe. It didn't work that way, and emerging market equities were hit even worse than those in the developed markets. Lately the Asian emerging markets have been moving up faster than the US market, but it also seem the economies are as well. And, funny thing, the Eurozone is growing faster than the US--at least for now. There should be concern for the Chinese market after the big rally--lots of IPOs, bank loans up at high rates, and maybe some of that money flooding into stocks. Global banks are considering listing in Shanghai and floating stock there. Of course, hot foreign markets are always the last place Wall Street goes to sell junk, when they've run out of locals who haven't heard the news. While playing the Chinese market in the short term given the current liquidity bubble is not for the faint of heart, especially with the government warning against speculation and bank loans finally slowing, continued economic decoupling may lead to returns exceeding those in the developed markets over a longer horizon.